One Of The Best Way To Prevent Dead Stock!
By Bob Boyles, Principal
Smarter Distribution

There are two types of dead stock! The items that were dead the minute the came in off the UPS truck and those items that have died a dusty death in the warehouse after being productive for a number of years. This article is about the first category. We’ll need to handle the second category in a separate article.

Think of your inventory. Is there any item that when you bought it you said to yourself “alright we’ve just bought something we’re never going to sell!” The obvious answer to the ridiculous question is, no. There are no dead-stock products that you bought on purpose. Every item you put into stock was done with the best intentions and belief that it would eventually sell. But then the question that follows is how did this happen? What went wrong with our stocking decisions that some products succeed and some fail? How can we increase the likelihood that more of the new products we introduce will be productive contributors rather than profit drains?

First lets get to the bad news, there no crystal balls issued with the paychecks of inventory managers! They must make their decisions based upon the facts set before them just like every one else.

Now the good news, in spite of not having a crystal ball you have all the information you need to reduce your dead stock. The answer lies in how you handle the procurement process. By proactively managing information rather than reacting to it is the way that you can prevent dead stock.

II recently sat down with a large distributor and discussed their inventory situation. It was not that different that a lot of distributors I work with. They had a lot of dead stock and had no idea where how it got there. Now they we faced with the task of moving a lot dead stock through costly transfers and costly returns and those were the items they could do any thing with. The telling question about where their dead stock came from was disclosed in how they answered the question. “Whose job is it to review the new items at the end of their honeymoon and reassess their stocking status?” The answer was silence!

The concept here is that every product is put into stock with the best of intentions but at some point they need to be reviewed and a determination made if they are to be added to the role of stocked products. The time to make that assessment is at the end of a product’s honeymoon and not 5 years after it was bought. The honeymoon is a familiar concept to all distributors. When you buy a new product you have no idea what the demand is going to be so you arbitrarily set the ordering points until the system has collected enough sales data to accurately determine the order points, etc. The period between initial purchase and when the product can fly on it’s own is the standard honeymoon. The problem is that this distributor just turned the product loose after the honeymoon and never looked back. They missed the best opportunity to return the product to the vendor and avoid a dead stock problem two years down the road.

The idea here is to review every new product at the end of it’s honeymoon and determine if it should be stocked. Further, that when a stocking decision is made then is the time to determine the vendor’s policy on returns. Some of the most important pieces of information on the form are about the vendor’s return policies.

This technique will not eliminate dead stock. But it is a tool that every smarter distributor should have in their arsenal. The combination of asking for the vendors return policy upfront and then reviewing items as their honeymoon expires can help you reduce your dead stock!

If you would like to receive a sample "New Product Request Form" e-mail us at info@smarterdistribution.com

About Bob Boyles and Smarter Distribution:

Bob Boyles started his strategic consulting business in 2001 and has focused on the change that technology is forcing in the supply chain and how independent distributors can not only respond to that change but also maximize the return they are seeing on their investment. Bob has spent a significant amount of time as an Installation Consultant for several of the big name software companies in the distribution market. Working with hundreds of distributors across the country on installing, upgrading and utilizing their software. Bob also worked as Corporate Systems Manager for one of the largest electrical wholesalers in the country as that company moved from a completely manual operation to an on-line real-time system.

Bob is a graduate of Appalachian State University (BS - 1981) and University of North Carolina at Greensboro Graduate School of Business (MBA - 1985).

© Copyright 2002, Robert S Boyles, Jr. All rights reserved. This article cannot be reprinted or reproduced in whole or in part, without the express written permission of Robert S Boyles, Jr.